KEY POINTS:
A 30 per cent increase in the estimated amount of oil for the Tui field has sent New Zealand Oil & Gas shares soaring.
Following news the company had upgraded its estimates, shares climbed 11c to close at 1.12c, a three month high.
The Tui Area Oil Project, off the Taranaki coast, now has an estimated 41.7 million barrels.
The new figure for proven and probable reserves compares with estimated reserves of 27.9 million barrels on which the Tui project in offshore Taranaki was first sanctioned, and an interim re-estimate of 32 million barrels following completion of the development drilling campaign.
NZOG has a 12.5 per cent share of Tui. Its share of the reserves has increased from 3.5 million barrels (pre-development) to 5.2 million barrels.
John Kidd, an analyst at McDouall Stuart Securities Ltd, said the significance of this news should not be underestimated.
Kidd has previously said Tui is a company maker for NZOG.
"With 30 per cent more reserves, and the ongoing possibility of further upgrades as field deliverability becomes better understood, this is now even more the case," he said.
"At this rate, NZOG's $140 million of existing accumulated tax losses may not last beyond its current financial year."
The field produces a light sweet crude that is generally sold, with freight and quality differentials, against the Tapis benchmark crude, which has recently surpassed US$100 ($132) a barrel.
That means the upgrade at current prices had a current gross value of more than $200 million.
The increase in reserves follows a reassessment of the field by the operator (AWE) based on interpretation of re-processed 3D seismic data, a more detailed assessment of the Kapuni reservoir and the integration of the production data from the fields since production began in July, the company said.
The increased reserves assume production from the existing four wells, plus the completion of an additional development well in the Tui field.
Planning for drilling of this well has begun, with drilling targeted for 2009.
At Tui, production rates of up to 50,000 barrels of oil per day have been achieved, with the well capacity still substantially higher than the processing capacity of the Umuroa, a converted tanker permanently moored off the Taranaki coast.
NZOG said water is being produced from the field, but at substantially lower rates than expected.
Based on the current reservoir and facility performance and the upgrade in reserves, AWE has revised the Tui gross oil production for the year to June next year up from 10 million barrels to approximately 11 million barrels - about 1.4 million barrels net to NZOG.
Tui partners
* New Zealand Oil & Gas 12.5 per cent
* Australian Worldwide Exploration (Operator) 42.5 per cent
* Mitsui Ltd 35.0 per cent
* Pan Pacific Petroleum NL 10.0 per cent
